Key Takeaways
- The long-term macroeconomic picture may be murky, but BlackRock global chief investment strategist Wei Li says the short-term outlook is constructive.
- Li is bullish on US stocks, but she emphasizes that investors should remain nimble.
- Li thinks narrower plays, such as the AI boom and deregulation in certain industries, may be more reliable than bets on macroeconomic forces like interest rates and global growth.
Uncertainty is the buzzword of the year in markets. From new tariffs and a volatile US stock market to bond market jitters and drama at the Federal Reserve, 2025 has thrown investors for a loop. But for BlackRock global chief investment strategist Wei Li, an uncertain environment isn’t a signal to circle the wagons.
“Headlines can be scary, but that’s not a reason to derisk,” she says. That’s especially the case when market fundamentals have not changed significantly since the start of the year and earnings remain solid. Rather, she thinks today’s market dynamics call for a different playbook focusing on idiosyncratic factors, such as the artificial intelligence boom.
A New Landscape for Risk
Until very recently, mean reversion—making trades based on the idea that a financial asset’s price will eventually return to its long-term average—and value investing were reliable tools. Investors could be confident that their cheaply valued exposures would eventually pay off.
But Li notes that stocks have defied expectations, rising higher on the back of mega-cap technology firms despite warnings about stretched valuations. Investors are demanding more yield for Treasury bonds, which look riskier than in the past, and global markets are suddenly questioning the safety of the US dollar. “We’re in this environment where we don’t know what the mean is anymore,” she says.
Meanwhile, the macroeconomic signposts that historically guided investors— reliable trends in fiscal spending, inflation, and growth—are less predictable. Between the 1980s and the pandemic, the global economy grew steadily, while central banks effectively moderated business cycles. “Having exposure to the rising tide was enough to do quite well in portfolios,” she says. “You just had to stay invested in equities, in bonds.”
That’s not the case anymore. “This is an environment of inflationary pressure. Central banks are facing tougher tradeoffs, and that means macro may not be as reliable a friend in taking risks as before,” she says. That means big bets on economic growth or the path of interest rates may not be as fruitful as they once were. “We have greater certainty over the nearer term than the longer term, and that’s why we prefer to take risks over the nearer term while trying to position for any new signals of where we’re heading,” Li adds.
Why the Bond Market and Supply Chains Are Positive in the Near Term
Li says that two factors give her team more confidence in the outlook for the shorter term than the longer term.
One is the bond market. Foreign investors make up roughly a third of the market for US government debt. Anxiety among those investors, spurred by unpredictable trade announcements, can have (and has had) major implications for bonds. In other words, President Donald Trump’s ability to reshape global trade is limited by the bond market’s tolerance for policy volatility. “If you walk away from the trade relationship too quickly,” Li explains, “volatility in the government bond market would bring the negotiation and the discussions back on track.”
Another is the rigid structure of global supply chains, which have developed over decades. Those processes can’t be undone overnight, and Li says disrupting them via changes to global trade policy would mean “very grave consequences,” like empty shelves and shortages of critical goods.
Li argues these factors will keep the picture more predictable for investors for now, despite what some alarming headlines might imply. “You have really dramatic swings in narrative, but the fundamental picture has not changed a lot,” she says. Growth is holding up, the economy has thus far avoided recession, and solid earnings this year have created a supportive environment. The picture ”supports a risk-on stance,” Li says.
How to Take Risks Right Now
Li points to idiosyncratic factors, like the ongoing buildout of AI technology and infrastructure. But a rising tide isn’t lifting all boats. Rather, the wave of AI is creating more dispersion among winners and losers in the industry. That means plenty of opportunities.
Another idiosyncratic strategy is based on the effect of deregulation on US firms. “Positioning for the direction of travel can be another way to build risk positions in a portfolio,” Li says. Take bitcoin: Expectations of an easier regulatory environment for the cryptocurrency have sent prices up more than 20% this year.
Li says that focusing on relative value—taking bets on whether the prices of certain assets are likely to rise or fall based on the value of similar assets—or making single-stock bets are other ways to capture risk outside of macroeconomic forces. “The time for active is back,” she asserts.
Li also suggests finding new portfolio hedges, since government bonds may not be a reliable ballast down the line. One example is gold, which has in many ways “behaved as a better diversifier than long-duration government bonds.” She also points to hedge fund strategies, which don’t rely on macroeconomic anchors.
Stay Nimble
Overall, Li says her team is taking a more dynamic stance on asset allocation. That means moving away from buy-and-hold strategies toward more targeted near-term calls. “We’ve built out a risk-taking toolkit that goes beyond having big macro exposures,” she says. Successful investors should “be more dynamic, more practical and nimble, and more active in this environment than before.”
